North Carolina Takes Perilous Lurch to the Right

Aug. 19 (Bloomberg) -- North Carolina is channeling Alabama
and South Carolina when it comes to the best economic, social
and political model for a U.S. Southern state.

For more than half a century, North Carolina has been
progressive on education and public investments, and pro-business -- witness the celebrated Research Triangle between
Raleigh, Durham and Chapel Hill and the financial center in
Charlotte -- with less racial strife than other Southern states.

As Republicans took full control of the state government in
Raleigh, there has been a shift to the right. Taxes for the
wealthy have been slashed, and spending for education and
programs that benefit the poor have been cut. Abortion has been
restricted, and guns rights expanded.

At the end of the legislative session in July, in a state
that has enjoyed relatively good race relations -- which the
business community both encouraged and benefited from -- voting
privileges for blacks were targeted.

Governor Pat McCrory, a Republican elected last year, says
the turn to the right is necessary and is paying off.

“We’re getting tremendous positive feedback from the
business community,” he said in an interview. His state had
“lost its focus,” and needed to be “shaken up.”

Budget Director

To critics, this conservative agenda -- much of it
orchestrated by Art Pope, the governor’s budget director and the
multimillionaire retailer who is the Tar Heel State equivalent
of the Koch brothers -- threatens the state’s legacy.

“We’re turning back everything that made us different from
other Southern states,” said Jim Goodmon, the chairman of CBC
New Media Group LLC and owner of the Durham Bulls Minor League
baseball team. “With this shift, economic development is
broken.”

Ronnie Bryant, the chief executive officer of the Charlotte
Regional Partnership, the area’s top economic development
recruiter, recently complained to the Charlotte Observer that
all the efforts of recent years to promote Charlotte as a
business center “have been negated in the last few weeks.”

He said business leaders elsewhere are asking: “What the
hell are you guys doing?”

Ann Goodnight, a powerful advocate for higher education in
the state whose husband is CEO of the giant technology company
SAS Institute Inc., wrote a letter to the Raleigh News and
Observer charging that cuts in education funding were a
“grievous mistake.”

The places that succeed in economic competitiveness, she
wrote, “are investing in education and using the playbook we
once embraced.”

“They are extremists, and are playing the race card,” said
the Reverend William Barber, head of the state’s chapter of the
National Association for the Advancement of Colored People,
which is organizing multiracial coalitions around the state, and
turning out thousands to protest these changes.

On taxes, the Republicans cut the corporate rate, ended the
progressive personal income tax and eliminated the estate tax,
which affected, on average, fewer than 75 families annually and
will cost the state $300 million in lost revenue over the next
five years. The legislature also decided not to continue the
earned income-tax credit for the working poor.

North Carolina requires a balanced budget, and new expenses
must be offset elsewhere.

‘Benefit Millionaires’

“They put in place tax cuts that overwhelmingly benefit
millionaires,” said Alexandra Sirota, director of the left-wing
North Carolina Budget and Tax Center, “while choosing not to
extend a tax credit for the working poor.”

The governor, who is as moderate in demeanor as his
previous record as mayor of Charlotte suggests, denied that he’s
been captured by the right. The tax cuts were essential, he
said, because North Carolina was falling behind economic
competitors such as South Carolina. He points out that spending
for kindergarten through 12th grade increased (though not enough
to keep up with inflation and population growth) and that
funding for community colleges was cut because enrollment is
down. Asked about support for the world-class University of
North Carolina, the 56-year-old governor replied, “They can’t be
satisfied with the status quo.”

Goodnight, he said, is a Democrat. Besides, he added, her
husband supports him. When asked about the alleged voting fraud
that mandated the changes in procedure, he offered no specifics:
“It’s like insider trading; you don’t know until you look.”

The governor bristled at claims that Pope is the real
kingmaker. “When he made Pope the budget director,” Goodmon
said, McCrory “became a puppet.”

Pope’s political contributions, the governor said, are no
different from Goodmon’s giving to Democrats. He depicts his
budget director as a fiscal conservative, a benign libertarian
with no racial animosity. Pope declined a request for an
interview. The governor said he has headed off some right-wing
moves, vetoing a bill subjecting welfare recipients to drug
tests and killing a measure that would have created an official
state religion.

Yet, Goodnight points out she’s a registered Republican.
Goodmon’s contributions -- mainly, though not exclusively to
Democrats -- pale next to the millions of family wealth that
Pope has given to the Republican Party through his political
action committee, foundations and personal contributions.

As for the competition with South Carolina, the two states
last year had roughly identical, strong economic growth and both
have jobless rates worse than the national average. Multiple
surveys have long rated North Carolina’s one of the best
business climates in the U.S., its higher education system is
better than its neighbor’s, wages are higher and poverty less
pervasive.

North Carolina, dating back to the 1960s and Terry Sanford,
the country’s best one-term governor, and four terms of Jim
Hunt, produced a much-envied system of higher education and
community colleges, good race relations, a desirable quality of
life and a healthy business climate. The debate about its
usefulness today will persist. The North Carolina model, which
served the region and country so well, is gone.